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Consultation launched on public sector payouts cap

The government has launched a consultation on capping redundancy pay-offs for public sector workers at a maximum of £95,000.

Plans to cap payments, which had been included in the Queen’s Speech in May, are moving from theory into reality after an announcement today (31 July) by chief secretary to the Treasury Greg Hands MP.

He said: “It’s not right that highly-paid public sector workers should receive huge taxpayer-funded payouts when they’re made redundant. We need to invest taxpayers’ money more efficiently on priorities like the NHS and national security.

“I am not prepared to stand by and allow huge payoffs to be made at a time when we are having to find savings in our public services as we seek to run the strongest budget surplus for more than 40 years. That’s vital to ensuring economic security for the working people of Britain.”

The new cap will be legally enforced and apply to all major public sector workforces, including the Civil Service, councils, the NHS, schools and quangos. It will apply to all forms of compensation including redundancy, pension top ups, compromise agreements and special severance payments.

The move will exclude independent public service broadcasters like the BBC and Channel 4, as well as Bank of England and some regulatory bodies.

However the government declared it “expects [them] to follow suit and implement equivalent restrictions”.

Hands expects the ban of six-figure payments to save £100m per year.

According to the Treasury, nearly 2,000 public sector employees bagged payouts of over £100,000 in 2013.

They are now keen to gather feedback on whether they should press ahead with the cap and on which public sector organisations should be in scope.

The consultation closes on 27 August.

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